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Sunday, July 27, 2008

Costco: A Budget Help or a Budget Hurt?

Those looking for ways to slash their spending are frequently told, "join Costco (BJ's, Sam's, etc)." There is no question that there are many products in these warehouse stores that are good bargains (Empire chicken, gas) and there some products that are absolutely fantastic bargains (olive oil, pine nuts, and yeast (!!!)). But, shopping in these stores can also be a budget breakers. Perhaps the biggest challenge is being faced with so much bulk, often for a lesser price, but buyer beware the price isn't always less than that of your regular grocery store's regular price, to say nothing of sale price or sale price combined with coupons. Bulk at a lesser price is only bargain if you are buying a product you already use. Buying something in a larger quantity because it is a good price when you would opt for a lesser priced produce for the same purpose isn't a bargain at all.

Another challenge posed by warehouse stores is that so much is under one roof. There are also discount department stores like Walmart and Target introducing grocery sections which makes for a similiar challenge. Not only can you buy milk, eggs, cereal, chicken and pasta while you are there, you can also fill in your children's summer wardrobe, pick up swimsuits for summer camp, grab some socks and underwear, get some office supplies, buy some things for the kitchen, pick out some music or books, and perhaps even get that new refrigerator while you are there. It is just so convenient and the price is right, right?

Well, maybe. The price might be "right" compared to the regular price at another store, but warehouse stores often have a way for convincing the shopper to buy things that they never really needed in the first place, buy more than they needed, and perhaps most insidiously buy it now because it is right there and will save time and who wants to go back later (plus the item might be gone then). A Blogger at Getting to Enough agrees with my sentiments and so do the commentors.. . . . and so do I. I rarely have left Costco without buying something that is not on my list and that I would have found a better replacement for.

My recommendation for those who are not members (I tend to tag along with my father-in-law or a friend) is to see if a friend with pick up something on your list (perhaps yeast or olive oil) while that friend is there anyways. That way you can get the few products that really are worth buying without the experience that is bound to throw even the most disciplined off their game. r

Updated: Check Out the NY Times on "The Costco Effect." Highly recommended article. -----------------------------------------------------------------------------------

Also, I can't help but point out the MSN Money article "Can a Family Eat on $100 a week?" The rules the author set up for her challenge included no paper goods or cleaning products, shopping only in regular grocery stores (i.e. no warehouses or ethnic markets), and no coupons. She didn't meet her budget, she felt deprived, didn't eat enough fresh produce, but did come close to her budget and learned some things during the challenge.

Frankly, the challenge window was far too short. It didn't allow for stockpiling sale items nor bulk cooking and freezing. While the idea of a one week challenge is *cute,* it just isn't realistic. Keeping a slim grocery budget is a long term project, not a one week diet. Perhaps we eat less, but I just calculated out our average weekly grocery and drug store bills though July 31, 2008 and I am averaging handful less than $100 a week and I don't think anyone feels deprived. We eat a large variety of food, enjoy a lot of interesting dishes on Shabbat, and enjoy a nice amount of produce. Not only that, but we keep Kosher, diapers are included in this figure, we made Pesach, and we had company for an extended period. But I'm sure if I took the same challenge the author did, I'd exceed the allowance too. Diets rarely work. Small changes in habits in small increments will yield more permanent results.

Another MSN columnist tried a cut the bills in half challenge over a one month period. Her household did come out ahead, but didn't meet their target. The one month challenge period was a more realistic time period, but still not really long enough for a serious examination. She learned that two cooks in the kitchen isn't the most efficient way to grocery shop, but that it wasn't worth eroding their "shalom bayit" over her husband's less efficient shopping habits. Good advice, I'd say. She is certainly spot on with her assertion that it is most efficient for one person to be in charge of the grocery budget.

I don't find Costco worth the membership fee for the types of items that I use in the amounts that I use them. For the very few things where they have a bulk item that is a better price then the smaller sizes on sale elsewhere I do as you do--I ask a friend to pick up the item. I also find that they don't have enough variety in their merchandise--it's inevitable that the only oatmeal that someone in my family will eat is the one that they don't sell.

Regarding that $100 a week challenge, they may have excluded cleaning products and paper goods, but what about things like spices, that last for a long time? Or garbage bags for the kitchen garbage can? Are toothbrushes and toothpaste considered cleaning supplies? Most people who do a shopping budget aren't limiting it to only those fresh items that need to be purchased for meals each week. They include all household items that they use. Many shop at "ethnic" stores or wholesale stores. Many stockpile, so that the amount spent one week is not the same as the amount spent another week. Many people do shop sales and use coupons of different types. What did they actually prove by picking that arbitrary $100 number?

ProfK-Like you I don't think it is fair to exclude cleaning and toiletrries. My bit less than $100 a week includes diapers and toiletries. Of course, I can't remember the last time I actually paid for a tube of toothpaste, a toothbrush, or even shampoo. Long live the rebates at Rite Aid and he coupons in the newspaper. I do have to fork out something for diapers, but fortunately some enough packages keep landing on the damaged rack to keep baby bottoms covered.

One thing I found in my brief foray into warehouse membership (years ago, so my comment may be out of date) is that the store brands at my supermarket were often less than the bulk prices on natinal brnds that I got at the warehouse.

I don't get it. I feed my family of 3, including shabbos guests, on roughly $60 a week 3 weeks a month, and $100 the last week as it includes all the monthly cleaning supplies as well. IT was closer to $100 a week when we needed diapers and formula, but we eat quite well for our budget. Meat 2 nights a week, fish at least once or twice. No shortage of milk, eggs or cheese. And everything is strictly kosher.

I don't have membership at Costco, and I don't know if I am really missing out as a result. I do a lot of comparison shopping in local stores for groceries and online for bigger ticket items. I also do venture out to Walmart once in a while, so I only pick up groceries when there when I am really gong for other things, like inexpensive T-shirts, socks, etc., particularly when stockpiling for camp. But the temptations there is to say "yes," when a child asks for sunglasses that are only a few dollars as it appears a justifiable purchase, or picking up some cut keychains for the kids at 75 cents a piece. Had they not been that cheap, I would not have bought them. And so you do get the problem of spending more as a result of low prices.

The easiest way to determine whether a membership is worthwhile or not is to examine what you normally buy and what it costs, see what Costco has and what they charge, and if you'd make up the membership cost.

I've always wondered whether the "picking up for a friend who isn't a member" thing is okay. I think most stores like that require that non-members be accompanied by members, and they only have a certain amount of "guests" they can have a year; they're hoping those people will become members too. I don't know if that would apply to picking things up for people...

Happy Duck-You need to be a guest poster. Seems your budget is really under control. Tell us your secrets! I don't even come close to your budget and we reserve meat for Shabbat and cheese within limits.

as i've commented before, i'm a big fan of costco for a number of reasons:

1) time saver: everything under one roof and no need to wait for sales.

can you find better bargains elsewhere? sometimes. but you have time to visit 12 stores different stores to maximize benefits, wait for sales, cut coupons, etc. if you have time for this, then great and costco is not the best for you.

2) quality, even with their store brand.

can you find cheaper alternatives elsewhere? sometimes. but i can also apply child ish's maxim here ("Nothing is free in this world"). you can buy plastic forks in the 99 cent store, but they will bend.

my ipod battery will eventually die. they all do. and they're not user replaceable (great strategy from apple). i don't care. when mine dies i will bring it back to costco, get a full refund and upgrade to the newest ipod. same thing with my shaver. these are no-brainer purchases. (unfortunately, because of customer abuse, this policty is now limited for certain new electronics purchases to 90 days).

just 2 stories: last year the foot pedal on my 6-year-old kitchen garbage pail broke. i had no receipt. i brought back this dirty, broken pail and they took it back with no questions. also, a few months ago i bought a pack of t-shirts. i realized when i got home i bought the wrong type, but my babysitter had already opened the pack and put them away in my drawer. 2 weeks a go i brought them back with no packaging or receipt and they took them back.

the biggest problem with costco was mentioned in the post. you have been very discipled and know what you need. it's very easy to put things in your cart that were not on your shopping list and that you didn't need. i'm guilty of this, but usually i will realize when i get home i don't need it and return it (see #3 above).

I used to shop just like Sfardi Lady, albeit for a larger family. Since living in Israel, there is no more shopping in bulk. There are no coupons and weekly specials are not what I was used to. There are no Costcos, Walmarts, Targets etc. I find myself spending far less, relative to what I spent in the States, by buying JUST what I need, generally for the week. I can't believe I used to buy and stock up on 10 boxes of cereal. We buy maybe 2 boxes/month now. If a kid needs socks, we buy JUST socks. Although there is something to be said for "the American way", the overzealous savings many times bring to overspending in the end, anyway.

Tamiri; I see you point on not buying in bulk in Israel, but sometimes there are sales that are really worthwhile. 2 months before pesach i found canola oil for 7.5 shekels/liter. I was so happy that I bought about 30 liters. Since we have no space we had to store them under the table in the kitchen. After pesach canola oil was about 10 shekel/liter. Now we can barely find it at all and it costs 14 shekels/liter. I still have a few bottles left and I hope to find a good price soon.The hardest part of making aliyah regarding food was that i didn't know what was a good sale so we overspend for the first half a year. Now I know when I see a good deal and I jump to it.

I did make few changes in the way we buy. Since chicken never goes on sale here, i find that there is no point in buying in bulk, unless I am in one of the mega/super stores where it is cheaper. I rather use the freezer space for ready made food and keep only one package of chicken at the time.

We found that the best way to buy cheap here is to drive to the nearest city with a big charedi population and go to 2 of the mehadrin stores (shefa and whatever else is in town). Dh goes to one and I go to the other one. and we talk on the phone comparing the prices of major purchases. Then we buy enough for at least 2 months.

I buy at BJs. Anything BJ brand is far cheaper than generics in the supermarket or walmart. Also I buy yeast, kedem grape juice, flour, 10 lb bag sugar, stuff like that. I find the biggest issue with buying at BJs is not that I end up buying stuff I don't need -- I find that isn't really the case especially when I shop WITHOUT the kids. For us the issue is that when we have a lot of something we "feel rich" and do not conserve as much.

For this reason I don't buy certain things like apple juice and cereal there. If my kids find themselves facing a huge box of cereal they will tear into it without abandon. Likewise the juice.

Back to the monthly budget -- I can't imagine how someone feeds a family on $60/week including fish and meat!? I do not buy much in the way of processed foods -- I *never* buy challah and only rarely buy bread -- heck, I don't even buy pasta, we make our own, but I don't skimp on the meat and cheese because it's so much easier to prepare a filling/crowd-pleasing meal that is based on cheese or meat.

Also, on Shabbos I forego the cheaper cholent for slightly pricier shnitzel since I'd rather see the food get eaten than thrown away and pretty much noone including my husband eats cholent. However, I serve my whole family shnitzel (except hubby) on 1 whole chicken breast with left-overs (we cut it really small and call it "nuggets").

I would be very interested to see the weekly menus of you folks spending $100/wk or less on groceries.

tdr: you need to remember that the way we eat meat and chicken nowadays has really changed in the past 50 years. What we call a portion of chicken, meat, or fish is about 2 or 3 times what it used to be (and also of the FDA's recommended portions). If you really serve a real portion instead of a monster one, and have side dishes as the majority of meal, a $100/week budget is a lot more doable.I know that if I only eat a real portion I'll feel deprived because it's not what I am used to. So I simply don't make chicken or meat during the week :).A family of 4 can easily finish an entire chicken in one meal. If you serve a smaller portion it feeds 8. A huge difference.

Costco is good for people with limited time -- we want to get a decent price, but we don't have time to go from store to store. Many of us are in two income families where the 2nd income more than makes up for the slightly higher grocery bills. So Costco is a happy medium - paper towels are *always* cheaper than ShopRite's regular price, yet probably higher than ShopRite's best sale price.

Also, Costco carries better quality national brands and their own brands are better quality. I don't like Marcal paper towels because they are cheap and thin and I end up using at least twice as much. So Marcal's cheap price would not save me a penny and would leave me aggravated as a side effect.

The $100 / week thing - can we be fair? Is this meant to apply to a family of 8 with some teenagers? Let's be real.

"What we call a portion of chicken, meat, or fish is about 2 or 3 times what it used to be"

i remember comparing diets in a history class in college, with the conclusion that we are gluttons compared to europe.

and i'll never forget when a friend of mine came to visit from england for the first time. we went to kosher delight, which i consider overpriced and small portions. he was amazed at how much he got for so little money. he had the same reaction no matter where we ate.

and i'll also never forget how when i went to visit him, his mother put just enough food on the table for one serving for everyone. and these weren't poor people.

Here's an interesting question: Many people have mentioned buying huge amounts of oil, cereal, etc when the item goes on sale. They store these items in storage rooms, closets, or even under the kitchen table! I first experienced this at home with my parents and to a lesser extent (because we're in an apartment and not a house) we do the same.

All of this leads me to wonder. Is this worth it? Assuming you're not getting SL-type deals where the store actually pays you to buy it or it's nearly free, does it make sense to do this? My mom at any given time probably had $300-$500 worth of food and supplies in her storage room (now it is less with kids out of the house). We probably have $150-$250 worth of food in our supply closet.

Of course there's a convenience factor to having a bit extra so you're not running to the store every other day because you only keep 1 box of cereal in the house. But, does it make sense to have so much money "locked up" in a storage room? It seems that many people with storage rooms/closets just keep the closet perpetually full so that at any given time you have several hundred dollars locked up in that room.

It seems that while you're saving 75 cents a box on cereal and you THINK you just saved say $7.50 by buying 10 boxes, are you really? You're saving $7.50 but keeping say $300 tied up in food supplies.

The problem is even worse for people who don't stock up on great sales. If you have say $500 worth of food/supplies, you might be losing money!

I hope my point came across properly. I often look at my closet which I make sure is constantly stocked and wonder if I'm just tricking myself into thinking I'm a smart shopper and saving money. Maybe I'd be better off, for example, storing only half as much and investing the rest in bonds or a CD.

Also, I would love to see people's meal plans that allow for ~$100/week budgetting. Would make for a good post perhaps.

js - with interest rates as low are they are now, the time value of money is less. I think a smart shopper is still coming out ahead. If interest rates were in the 10-12% range as they have been at various times in the past 25 years, then the stocker-upper is probably, as you posit, actually losing out.

i'm a hoarder even though we live in a small apartment. no way i am running to the store to buy one roll of paper towels at a time. as long as we are talking non-perishables, what's the big deal? we do use almost all of our costco bulk purchases. and it 2 years later i realize that i haven't used something i can bring it back for a full refund, no questions asked. (did i mention that costco has a great refund policy?)

as far as the alternative of investing in a CD, i think tseyaa answered appropriately.

JS: you have to know how to hoard properly :). My examply of hoarding on canola oil. The price went up about 100% within 2 months. So We saved A LOT in that hoarding. Cereal boxes and other foods. The cheap stores where I live are about a 40 min drive, we rarely go there just to shop, instead we shop there when we have to run errands there.Each box/item in that store is about 2-3 shekels less than were I live. The chicken is at least 3 shekel/kg cheaper. The difference in prices are simply too big. For a family of 6 or 8 it is still cheaper to drive the 40 min each way once a month (with israeli gas prices included)

In our local makolet, there are no sales whatsoever. So for us stockin is worth it.

The other thing is time. In america eventually I learned where to buy the cheapest, which meant at least 3 or 4 stores. I simply didn't have the energy or time to go to 3 stores each week, so instead i went to one store each week on stocked on whatever was the cheapest there.

Does stockpiling save you money? Yes, for the most part. It can also save you time (worth money, and don't discount it for working parents) and aggravation (running out in a snow storm for basic stapes is not fun).

We don't figure our budget by the week but by the month, quarter and year. I have a year's worth of laundry detergent, foil wraps, garbage bags,mustard, ketchup and tunafish. I have two quarters worth of peanut butter, plastic storage bags,masyonnaise tea bags and oil. I have a quarter's worth of cereals, oatmeal and hot dogs. I have two months worth of milk, egg substitute and frozen vegetables. I have from one to two months worth of other products I use regularly. Are there hundreds of dollars worth of food and household items in the house? Yes. But they were purchased at from 50 to 90% off the regular price. Did I spend more this week then we are going to use? Yes, but this month and this quarter and this year are going to cost me way less then if I only shopped for what I can use right now. Let's put it this way: for it to make more sense for me to bank my money and accrue interest rather than stockpile supplies I would need to find an investment that pays me at least 25% interest (what I'm going to come in under budget for for this year, given the huge increase in prices). Last year and in previous years I would have had to find investments of 30-60% interest.

js - with interest rates as low are they are now, the time value of money is less. I think a smart shopper is still coming out ahead. If interest rates were in the 10-12% range as they have been at various times in the past 25 years, then the stocker-upper is probably, as you posit, actually losing out.

Even if interest rates were 12%, stocking up still saves lots of money. For a few reasons:

1) When interest rates are 12%, inflation is somewhere around 10%. That means that the items you buy are going up in price every few months.2) Having a good stock of basic consumables means that you have to run out to get something much less often. Saves gas, time, and heartache.3) Even if you have $500 of stuff in your pantry and closets all year round, that's only $60 a year in lost interest (at 12%). You can very easily save far more than that, even 10 times that amount in a year, by strategically stocking up during great sales.

Thirty bottles of oil? Yes, you were lucky in that you beat the price rise, but that doesn't always work (I hope!). Oil won't keep forever; it gets rancid. I don't know how big your family is, but despite baking with oil I don't use much more than one and a half bottles a month. I brought home a new toy from the US, a cast-iron griddle, which I hope will reduce our cooking oil consumption even more (for health reasons, not savings).In Israel one needs to make sure not to be in overdraft when stockpiling, as the interest will cancel out any savings.

In Israel we had much lower produce costs, but they are going up. Way up.

Ezzie, I'm with you, although no one else seemed to even pick up on this -- I won't "pick something up" for a non-member, nor will I ask others to do so for me (at a different warehouse club type store I don't belong to). If we're all members, then it's a different story. But otherwise, well, it feels exactly like stealing, truthfully. Why should you get the deal if you didn't pony up the membership fee?

Miriam and Ezzie-We will have to open this up to the forum. My father-in-law has always picked up things for his kids and their spouses. I pride myself in honesty and have never put this under full consideration.

Regarding Costco policies -- I do know that they allow 2 cards on every account, and it doesn't matter if the 2 are from the same household or not -- so it is perfectly legitimate for 2 families to share one account (and share the cost), as long as the card holder is the one doing the shopping.